Global stocks inches lower; euro rallies, weak dollar lifts crude oil

US yields rise with European debts

NEW YORK, June 27, (Agencies): The euro rallied against the US dollar on Tuesday after European Central Bank President Mario Draghi fueled market expectations the ECB will reduce stimulus later this year, while the dollar’s weakness helped lift crude prices.

Energy and bank sector stocks rose on Wall Street, leaving the S&P 500 and a global equities index little changed on the day.

The euro hit its highest since early September versus the greenback at $1.1304 as Draghi, speaking to a conference in Portugal, said the ECB could adjust its policy tools as economic prospects improve in Europe.

“Just the fact that the ECB is considering their options right now is considered to be a hawkish signal,” said Sireen Harajli, FX strategist at Mizuho in New York.

The dollar index fell 0.7 percent, with the euro up 1.03 percent to $1.1294.

But the Japanese yen weakened 0.52 percent versus the greenback at 112.44 per dollar.

Sterling was last trading at $1.278, up 0.47 percent on the day. The Bank of England raised banks’ capital requirements and warned about levels of credit growth in pockets of the economy.

Federal Reserve Chair Janet Yellen is scheduled to take part in a discussion in London at 1:00 pm ET (1700 UTC). If her comments support the Fed’s forecast of further monetary policy tightening this year, the dollar could bounce back.

Also due to speak on Tuesday was Fed Vice Chair Stanley Fischer.

The dollar weakness helped boost crude futures prices, though the backdrop of a long-standing supply glut kept gains in check.

US crude rose 2.21 percent to $44.34 per barrel and Brent was last at $46.90, up 2.33 percent on the day.

On Wall Street, energy stocks tracked the price of oil higher while banks also helped keep the S&P 500 afloat.

The Dow Jones Industrial Average rose 25.3 points, or 0.12 percent, to 21,434.85, the S&P 500 gained 0.65 points, or 0.03 percent, to 2,439.72 and the Nasdaq Composite dropped 19.60 points, or 0.31 percent, to 6,227.55.

The pan-European FTSEurofirst 300 index lost 0.70 percent and MSCI’s gauge of stocks across the globe shed 0.02 percent.

Emerging market stocks lost 0.17 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.14 percent lower, while Japan’s Nikkei rose 0.36 percent.

US Treasury yields rose in sympathy with European government debt weakness, after Draghi’s comments.

Gold prices, which tumbled to their lowest level in nearly six weeks on Monday, were supported by the softer dollar.

Spot gold added 0.2 percent to $1,246.35 an ounce. US gold futures gained 0.09 percent to $1,247.50 an ounce.

US

Wall Street was lower in early afternoon trading on Tuesday as technology stocks continued to slide while investors focused on Federal Reserve Chair Janet Yellen’s talk in London.

The technology index fell 1 percent due to a drop in the shares of Microsoft, Facebook and Alphabet.

Alphabet fell 1.6 percent to $956.68 after EU antitrust regulators hit the tech giant with a record $2.7 billion fine.

Since the beginning of the year, the tech index has jumped about 18 percent, making it the biggest force behind the S&P’s record-setting rally.

However, the sector has come under pressure in the past few days over concerns about lofty valuations.

At 13:11 pm ET (1711 GMT), the Dow Jones Industrial Average was down 21.24 points, or 0.1 percent, at 21,388.31, the S&P 500 was down 6.8 points, or 0.27 percent, at 2,432.27.

The Nasdaq Composite was down 51.48 points, or 0.82 percent, at 6,195.67.

At a discussion in London, Yellen said it would be going too far to say there won’t be another financial crisis but the economy was much safer now.

Philadelphia Fed President Patrick Harker said on Tuesday the Fed rightly plans to raise rates once more this year, given recent inflation weakness is likely temporary.

The financial index was the top gainer with a 1.1 percent gains, with Bank of America up 2.9 percent and JPMorgan rising 1.6 percent.

Sprint rose 4.9 percent after the fourth-largest US wireless service provider was said to be in talks with Charter Communications and Comcast about a wireless partnership. Comcast and Charter were down about 0.70 percent.

Declining issues outnumbered advancers on the NYSE by 1,487 to 1,352. On the Nasdaq, 1,523 issues fell and 1,276 advanced.

Europe

Hawkish comments from European Central Bank President Mario Draghi hit interest rate-sensitive utilities shares on Tuesday, dragging down European indexes, while a warning from auto parts supplier Schaeffler hit the whole sector.

Draghi on Tuesday opened the door to tweaks in the bank’s aggressive stimulus policy, fuelling market expectations the bank will announce a reduction of stimulus as soon as September.

Utilities, whose constant dividends flows become less attractive when monetary policy tightens, fell 2.4 percent, suffering their biggest one day loss since November.

Shares in Spanish power network operator Red Electrica , Italian gas firm Italgas and German heavyweight utility E.ON were among the top losers in Europe with losses of more than 3 percent.

Their losses helped drag the panEuropean STOXX 600 index down 0.8 percent.

However shares in banks, which have long suffered from the ECB’s ultra loose policy, were boosted by Draghi’s remarks with the eurozone sectoral index ending up 1.4 percent.

Shares in banks such as Caixa, Deutsche Bank , Sabadell and Bankia — which are more sensitive than others to the rate cycle — were among the top five eurozone bank gainers, all up over 2.4 percent.

Bankia got an extra boost as investors cheered to its deal to buy smaller peer BMN in a $924 million deal.

A weak spot among banks was Italy’s Carige which fell 3.4 percent to a fresh record low on mounting talk the troubled Genoa-based lender will need more capital than the 450 million euro initially planned to repair its finances.

Autos fell 1.5 percent after German auto parts supplier Schaeffler slashed its profit guidance on growing price pressures and high costs. Schaeffler shares tumbled 12.8 percent.

German drugmaker Stada dropped 3 percent after Bain Capital and Cinven failed to win the required shareholder acceptances to take over the firm.

Stada, which have rallied nearly 26 percent this year, however came off earlier lows after Reuters reported that the private equity groups were discussing a new offer.

A.P. Moller-Maersk the world’s biggest advertising agency WPP fell 0.5 and 0.8 percent respectively after falling victim of a global cyber attack.

Gains among mining firms Anglo American, ArcelorMittal and Rio Tinto helped prop up the basic resources sector.

Asia

The dollar swung in Asian trade on Tuesday after a top Federal Reserve official indicated it would raise interest rates further this year, while traders await a speech from Fed boss Janet Yellen.

The dollar jumped to 112.08 yen at one point Tuesday — its highest level since mid-May — but soon retreated below its late New York levels. However it is still above the 111.31 yen in Tokyo earlier Monday.

Japanese equities rose, with the Nikkei ending 0.4 percent higher.

Toshiba fell 1.7 percent after a report in the respected Nikkei business daily said the firm was set to sign a deal offloading its prized memory chip business to a consortium of US, South Korean and state-backed Japanese investors.

Among other markets Hong Kong ended down 0.1 percent, Shanghai closed 0.2 percent up and Sydney fell 0.1 percent.

Singapore put on 0.4 percent and Seoul was 0.1 percent higher, Wellington edged up and Manila rallied 0.8 percent.

Key figures around 0820 GMT Tokyo — Nikkei 225: Up 0.4 percent at 20,225.09 (close)

Hong Kong — Hang Seng: Down 0.1 percent at 25,839.99 (close)

Shanghai — Composite: Up 0.2 percent at 3,191.20 (close)

Dollar/yen: Down at 111.70 yen from 111.89 yen

Oil

Oil prices rose for a fourth consecutive session on Tuesday, boosted by a weaker dollar, but worries over persistent oversupply capped gains.

Brent crude futures, the international benchmark for oil prices, gained 46 cents to $46.29 per barrel by 1356 GMT.

US West Texas Intermediate (WTI) crude futures were up 39 cents at $43.76 per barrel.

The gains mean the market is up slightly so far this week, after spending much of the last month in negative territory.

US crude inventory figures due out later on Tuesday could help determine if the market extends its gains.

The dollar fell 0.1 percent against a basket of six major currencies, before a speech by US Federal Reserve Chair Janet Yellen in London.

“Short-term financial investors also significantly scaled back their net long positions in Brent on the ICE last week ... and find themselves at their lowest level in a year and a half,” Commerzbank said in a research note.

“Short positions have soared to a new record high, having increased more than four-fold since the beginning of the year.”

The Organization of the Petroleum Exporting Countries and its partners have tried to reduce a global crude glut with production cuts. OPEC nations and 11 other exporters agreed in May to extend cuts of 1.8 million barrels per day (bpd) until March.

Despite the cuts, which started in January, inventories have not fallen as expected, as US producers and others outside the OPEC-led regime have boosted output.

Gold

Gold rose on Tuesday after hitting a six-week low in the previous session as bargain hunting set in and the dollar slid sharply before speeches by US Federal Reserve officials.

Fed officials have signalled that they plan to continue on their current trajectory of interest rate hikes despite a slow down in inflation. But softerthan-expected US data has given rise to some caution.

A huge sell order totalling 1.85 million ounces pushed gold to a six-week low on Monday, although the precious metal ultimately failed to break below the 200-day moving average.

“If yesterday gold wasn’t able to push below the 200-day moving average that’s a positive sign,” said ABN Amro analyst Georgette Boele.